Risk aversion frenzy sweeps the market! U.S. bonds are expected to achieve their largest increase in several weeks.

US treasury bonds are expected to rise this week, as the safe-haven demand outweighs the market's doubts about whether the Federal Reserve will cut interest rates next month. The yield on the benchmark 10-year Treasury bond has fallen by 9 basis points to 4.05% in the past five days, marking the largest weekly decline since the week of October 10. The yield on the two-year Treasury bond also dropped by a similar magnitude, marking the largest weekly decline since September. Although Fed officials, including Estan Goolsbee and Michael Barr, have expressed caution about cutting interest rates again in December due to inflation remaining above the target level, the bond market has shown the above trend. However, before the stock market opened on Friday, New York Fed President John Williams sent a dovish signal, stating that he believes the Fed still has room to cut interest rates in the short term due to the weakening labor market. This to some extent boosted the performance of US stock index futures. Next, the market focus will shift to the S&P Global Purchasing Managers' Index for November, which will provide the latest insights into the health of the private sector in the United States. Despite the soaring volatility, the bond market recorded gains this week. After touching a four-year low during the government shutdown, the ICE BofA MOVE index, which measures expected volatility in the bond market, rebounded to a two-month high on Wednesday. Pooja Kumar, Senior Interest Rate Strategist for Toronto Dominion Bank in Britain and Europe, said: "US treasuries are benefiting from the risk sentiment in the credit markets." But she added that factors such as reduced liquidity before the Thanksgiving holiday make the market "unpredictable." In addition to analyzing economic data, investors are also trying to cope with the impact of leadership changes at the Federal Reserve next year, as Jerome Powell's term as chairman will end. This adds a layer of complexity to the current outlook and makes the market vigilant about any potential successor's remarks, including National Economic Council Director Kevin Hassett - who said on Thursday that the Fed should cut rates "immediately." The currency market increased bets on rate cuts by 2026 on Friday, supporting further gains in bond prices. The two-year yield fell by 2 basis points to 3.51%. The market sees the probability of a Fed rate cut next month at around 40%. Although some Fed officials are concerned about ongoing price pressures, the market seems less worried. An index measuring inflation over the next two years is on track for its eighth consecutive week of decline, the longest streak since 2014.